BlueMauMau recently had an article about the increase in “better burger” franchises. I too have seen in the past two years an increase in the high-end burger space from both independent stores like The Daily Grind in Port Orange, FL (great store-baked buns) and franchises like Cheeburger Cheeburger and Five Guys. I recently performed a valuation on a group of high-end burger franchises for a client and I walked away with mixed feelings. The key driver of profitability was the lease costs, and the key driver for sales was location. The basic formula for a decent ROIC (return on invested capital) was convenient, high traffic location with a rent at or below 6% of gross sales. This ends up being the simple formula for most restaurants. Your restaurant’s cost targets should be: Prime Costs (Food and Labor) a combined 60% (about 30% each depending on type of restaurant), rent below 6% of gross sales, interest costs below 1.2%, owner’s net profit at least 10%, which leaves about 22% of your gross sales left for overhead, maintenance, royalty payments, advertising, and other costs. As you can see, an 8% royalty and advertising costs for a franchise cost takes a big chuck out your remaining 22% budget.The HARDEST part of predicting a restaurant franchise’s success is forecasting sales. Forecasting sales requires an analysis and comparison of other local restaurants, proximities (closeness to road, attractions, anchor stores, etc.), parking/drive thru, local demographics, competition, signage, brand awareness, and many other details. If your sales projections cannot confidently support sales at least 20% more than your break-even point, don’t do they deal.